The USDJPY currency pair continues to move towards the previously announced growth target. In the last couple of trading days, the dollar has been in a short-term correction after a long rise.
Recently there was a forecast emphasizing the fact that inflation in the U.K. remains at a high level contrary to expectations. The same was observed in the U.S., which is supporting the dollar in recent trading days. It can be concluded that global inflation continues to be strong and global central banks will continue to tighten their policies. Last year, such a situation led to a significant strengthening of the dollar index, the same situation is observed now. Widespread strengthening of the dollar will also affect the USDJPY currency pair.
Today this trend was confirmed by the Australian economy, where inflation was also higher than expected.
The decision of the Reserve Bank of Australia (RBA) on the interest rate is highly dependent on incoming economic data.
On Wednesday, inflation data for April was published in Australia. The monthly consumer price indicator rose by 6.8% compared to last year. In March, inflation was 6.3%. Analysts had forecast a more modest growth by 6.4%.
Analysts and officials are forecasting neutral U.S. monetary policy in the near future. Dollar will be neutral if the rate remains unchanged, but an unexpected increase may cause panic in the markets and an active growth of the dollar index.
Alvin Liew, Senior Economist at UOB Group in Singapore, comments on the latest release of the FOMC meeting minutes.
In the beginning of May, Federal Reserve System (Fed) officials made a unanimous decision to raise the interest rate by 0.25% to 5.00-5.25%. However, the latest minutes of the FOMC meeting, published on May 24, indicate the uncertainty of the further character of the monetary policy by the regulator.
Interest rate cuts are unlikely, but a pause in the tightening cycle remains possible, says the UOB economist. The current value of the rates may continue until the end of 2023.
According to the technical analysis, the USDJPY currency pair moved to a short-term correction. Currently, quotes are at the important 0.5 Fibonacci support level from the entire wave of dollar weakness over the past six months. It is believed that now there will be a rebound moment and the dollar will rise to the next Fibonacci level of 0.618.
The growth target can be set at 142.4. Stop-loss can be set at further decrease of the currency pair under the level of 0.5. Stop corresponds to the price of 138.5.
Growth of the USDJPY currency pair:
Take profit – 142.4
Stop-loss – 138.5